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USCIS Creates Controversy Over Tenant-Occupancy Economic Model

U.S. Citizenship and Immigration Services (USCIS) created a new controversy in the EB-5 immigrant investor world when it released a memorandum on February 17, 2012, concerning what it calls the "tenant-occupancy" economic methodology. According to USCIS, the tenant-occupancy methodology seeks credit for job creation by independent tenant businesses that lease space in buildings developed with EB-5 funding. According to a standard request for evidence (RFE) that many EB-5 regional center applicants received after issuance of the memo:

USCIS has concerns that the attribution of certain direct jobs to the EB-5 investment may not be based on reasonable economic methodologies, and therefore do not demonstrate in "verifiable detail" that the requisite jobs will be created. Rather, contemporary economic methodologies appear to indicate that such jobs would more appropriately be attributed to the tenants themselves and not to the regional center because the demand for labor precedes the decision about where to house that labor as a general economic principle. For example, if a federal agency determined that additional federal employees needed to be hired to fulfill the agency's mission at a particular location, the federal agency would seek to hire the requisite number of employees and as part of that process, would also take steps to lease the appropriate physical premises to provide sufficient workspace for the new hires. In this instance, it is the federal agency that is creating the jobs through its decision to hire more employees, not the landlord who will ultimately lease the workspace to the federal agency.

USCIS has issued over 80 RFEs concerning the tenant-occupancy methodology in recent months. Some regional centers have complained that the new memo constitutes a change in policy and that in any event, USCIS should not apply its new interpretation retroactively to already approved regional centers or EB-5 petitions that were filed before the February 17 memo.

In an effort to explain its position, USCIS Director Alejandro Mayorkas held a conference call on April 27, 2012, on the tenant-occupancy economic model and related RFEs. According to an unofficial transcript of his comments, Director Mayorkas said there would be a follow-up engagement on this topic and that USCIS plans to release a tip sheet with economic analysis guidance. He noted that USCIS has hired full-time economists and business analysts to improve the quality of the agency's work and the analysis of EB-5 petitions.

Director Mayorkas noted that USCIS decisions on the economic methodology presented in EB-5 cases are "very fact-specific." He said that USCIS has a "deference policy" and is "communicating to our adjudicators that they are to accord deference to prior adjudications." He noted that USCIS's adjudicators "should rely on a previous determination that the economic methodology is reasonable when [it] is presented to us in a later proceeding based on materially similar facts." For example, he said, if USCIS approved an I-924 regional center application based on a specifically identified project, including the specific locations and industries involved, the agency would not revisit the determination that the economic model and underlying business plan were reasonable when adjudicating related I-526 petitions, I-485 applications, or I-829 petitions. If USCIS approved an I-526 petition for an immigrant investor based on a specifically identified project not associated with a regional center, the agency would not revisit the determination that the business plan was reasonable when adjudicating the investor's related I-485 or I-829 petition, he said. If the facts underlying the application of the economic methodology have materially changed, however, USCIS would conduct a fresh review of the new facts "to determine whether the petitioner or applicant has complied with the requirements of the EB-5 program, including the job creation requirement."

On May 8, 2012, USCIS provided guidance on what deference it would give prior EB-5 adjudications that involved tenant-occupancy issues. The memorandum stated that in general, "a prior favorable decision will be relied upon in later proceedings unless the facts underlying the prior decision have materially changed, there is evidence of fraud or misrepresentation in the record of proceedings, or the previously favorable decision is determined to be legally deficient."

USCIS cautioned that the economic methodology presented in an EB-5 case is "very fact-specific." USCIS adjudicators "should rely on a previous determination that the economic methodology is reasonable when the methodology is presented to us in a later proceeding based on materially similar facts." "If, however, the facts underlying application of the economic methodology have materially changed," USCIS "will conduct a fresh review of the new facts to determine whether the petitioner or applicant has complied with the requirements of the EB-5 program, including the job creation requirement."

On the previous EB-5 stakeholders engagement call in January, USCIS had acknowledged that many regional center applications were being held up at headquarters pending resolution of economic methodology issues. On that earlier call, USCIS said it was analyzing all the I-924A forms submitted by regional centers and would draft a report that includes regional center-specific information sometime this year. The agency also noted that it would revise the I-924 form to provide greater consistency.

The February 17 memo on tenant-occupancy methodology issues is HERE. An unofficial transcript of Director Mayorkas' April 27 comments is available HERE. The May 8 USCIS memorandum is available HERE.

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